The financing of manufactured homes is a niche market. Not all banks offer this type of financing because of the varying underwriting requirements, risk and limited salability of this type of loan. As a bank begins to investigate manufacturing home lending, it is often focused on prudent underwriting and the safety and soundness for this type of lending. However, once a decision is made to participate in or originate these loans, the following two questions pop up: What disclosures are required? What are we required to do from a compliance perspective?
There is often confusion regarding the exact definition of a manufactured home. Many people utilize the terms modular home, mobile home, manufactured home, factory-built home and pre-fabricated home interchangeably. They are not the same and we must be cognizant that our borrowers do not always know the exact definition of a manufactured home, but lenders do. To clarify, a manufactured home (formerly known as a mobile home) is built to the Manufactured Home Construction and Safety Standards (HUD Code) and displays a certification label on the exterior of each transportable section. The HUD code requires manufactured homes to be constructed on a permanent chassis.
Remember that when financing the land along with the manufactured home, the transaction is treated as a residential mortgage from a compliance perspective. However, when we finance the manufactured home without the land, we do receive some relief from some of the regulations associated with financing real property.
Following is a summary of the lending regulations and their applicability to the financing of manufactured homes without land:
|Loan Application||Applicable||1002.4(c) Written applications. A creditor shall take written applications for the dwelling-related types of credit covered by §1002.13(a). §1002.13 Information for monitoring purposes. 1002.13(a) Information to be requested. (1) A creditor that receives an application for credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence, where the extension of credit will be secured by the dwelling, shall request as part of the application the following information regarding the applicant(s).|
|Joint Intent||Applicable||Regulation B|
|HMDA||Applicable||Manufactured and Mobile Homes meet the definition of a dwelling.|
|Servicing Disclosure||Not Applicable||Servicing Disclosures are covered by RESPA. RESPA applies to a federally related mortgage loan, which is defined as a loan secured by residential real property. Since land is not included, RESPA does not apply.|
|ARM Disclosure||Applicable||Required under 1026.19(b).|
|Service Provider List||Not Applicable||Not TRID applicable, as the Loan is not secured with the land.|
|Loan Estimate/Closing Disclosure||Not Applicable||Not TRID applicable, as the Loan is not secured with the land.|
|Initial TIL||Not Applicable|
|Affiliated Bus. Arrangement||Not Applicable||AfBAs are covered by RESPA. RESPA applies to a federally related mortgage loan, which is defined as a loan secured by residential real property. Since land is not included, RESPA does not apply.|
|Appraisal Notification||Applicable||Required for first liens on a dwelling under Regulation B. Under Regulation B, the term “dwelling” means a residential structure that contains one to four units whether or not that structure is attached to real property. The term includes, but is not limited to, an individual condominium or cooperative unit, and a mobile or other manufactured home.|
|Sale of Insurance||Applicable|
|NMLS||Applicable||Regulation Z is applicable. If the loan is a consumer credit transaction, the NMLS number should be found on the application, note and security agreement. (1026.36(g)(2).|
|HPML||Applicable||The loan is considered dwelling secured under Regulation Z. If an HPML, the Bank must follow appropriate escrow and appraisal rules.|
|Flood||Applicable||Flood regulations apply if the manufactured home is secured to the land, whether the land is included as collateral. The structure could be considered secured through attachment to another attached structure such as a porch, or through other securing mechanisms such as a strapping mechanism.|
|Appraisal/Valuation Provided to Consumer||Applicable||Regulation B is applicable – See comments under appraisal notification.|
|Notice to Home Loan Applicant||Not Applicable||Under FCRA, this disclosure is required only for 1-4 residential units of real property.|
|Initial Escrow Disclosure||Applicable||The loan is not subject to RESPA; therefore, an initial escrow statement is not required. However, if the Bank is establishing an escrow account (i.e., loan is an HPML loan) then it is a best practice to provide an initial escrow disclosure.|
|Final TIL||Applicable||Required under 1026.18.|
|ATR/QM||Applicable||ATR/QM is found in 1026.43. This section applies to any consumer credit transaction that is secured by a dwelling, as defined in § 1026.2(a)(19). Dwelling means a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home and trailer, if it is used as a residence.|
|HUD-1||Not Applicable||Not Applicable|
|Mortgage||Not Applicable||You will have a Security Agreement in place of the mortgage. Note that the security agreement must contain the Bank’s and mortgage loan officer’s NMLS #.|
|Note||Applicable||NMLS # required if this is a consumer transaction.|
|Right of Rescission||Applicable||Required under Regulation Z, if a rescindable transaction.|
|Risk Based Pricing Notice||Applicable||Use Model Form H-4 for loans not secured by real property|
|Housing Counseling||Not Applicable||The Housing Counseling List is required under RESPA. RESPA is not applicable to this type of transaction.|
|Negative Info Notice||Applicable||If the Bank reports to Credit Bureaus, this notice is required under FCRA.|
|Rate Lock Agreement||Optional|
|Intent to Proceed||Not Applicable||The loan is not subject to TRID and not subject to RESPA.|
|Military Lending Act||Not Applicable||Secured by a dwelling.|
This chart should prove to be useful in determining the compliance requirements when financing a manufactured home without the land and it is based on the premise that this a consumer transaction.
If you are considering offering this type of financing or have questions regarding your current loan program after reviewing the table above, please contact TCA for insightful consultation.